Good money after bad

In the last one year, the stocks of the top 100 companies in India have yielded a return of 15.68 per cent. This is a return that still keeps money in the pocket after adjusting for inflation. But in the same period, for the money invested in public sector companies, the returns would have been only 3.71 per cent clipping these companies from the BSE 100 index would have raised the returns for the investor. The results of the public sector Bharat Heavy Electricals Ltd (BHEL) on Friday showcase the damage that maladjusted policies can wreak on even the best organisations when they are subject to government control. The top line of the company declined by 4.9 per cent year on year, while its profit after tax went down by 17.5 per cent year on year. The drop in the company's performance can be attributed to the slugfest on coal, weakening balance sheets of power generation companies, and environment-related delays. To keep its cash accruals in line, the company has been forced to ask its clients for a cash and carry system, leading to a deferral of orders. BHEL's order book currently stands at Rs 1,13,700 crore, registering a decline of 22.4 per cent. The disinvestment in this company has had to be be pushed to the next fiscal.

Meanwhile, even as government agencies have railed against the private telecom companies for various distortions, the public sector BSNL and MTNL have lined up for a subsidy of Rs 23,000 crore. That India's telecom sector should witness the spectacle of the two public sector units in dire straits points to the extent to which wrong policies have played havoc. The companies need the money on two counts as refund for the airwaves they cannot use productively, despite being offered the first mover advantage, and as waiver of the one-time charge the government has imposed on telecom companies for the airwaves they currently hold. Profits at the private sector Bharti Airtel, too, have dipped massively in the third quarter of this financial year, but it is the company and its shareholders who will decide how to manage this loss of steam, without asking the general public to pitch in with their tax money.

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